As one client explained to me “I will only transition my family once – I don’t get to learn from experience – like you”. There is of course a lot of excellent advice and resource available. Tailoring it results in many wealthy families either intentionally or unintentionally designing their own master’s degree in “Managing Our Family Wealth/Business” - with family members going on in later life to take “courses” for extra credit on topics that they might have missed.
NextGen encompasses many things. I’ve focussed here on the under 25s. There are very broadly two complimentary areas to consider in producing from the NextGen strong managers, stewards and investors of family wealth: education and information.
"The right age to encourage children to become involved with the business and to become parties to the family charter is controversial…"
The right age to encourage children to become involved with the business and to become parties to the family charter is controversial. It depends on the business itself and when you consider somebody to come of age, whether that’s 16, 18, 21, or older. You should also consider whether the charter should be discussed at all before the age at which somebody is eligible to participate. It comes down to whether early engagement is worth the risk of alienation through the weight of expectation (after all even Prince Harry rejected his assigned role). However, don’t underestimate the potential benefit of giving the next generation more time to learn and grow, and to develop the skills and talents required to thrive in the business world. While you delay, they may make other plans. Whilst you might not wish the responsibility on them, you may be sacrificing their opportunity to learn unique skills as leaders and to develop a support network that will enable them to understand and participate in the management of the family wealth even if their careers lie elsewhere. Who says that a great artist or musician won’t flourish with a little business sense?
Setting out in the charter the education and training the family enterprise is willing to provide and, as importantly, finance can ensure a level playing field for all members of the NextGen. Traditional training courses to provide the skills and education necessary can operate effectively alongside more freeform methods. I often see NextGen members provided with a small fund to invest, to support a philanthropic or social enterprise or to run a new business venture that they have pitched. These can prove as successful in engaging and developing a business mindset as more traditional methods. “Secondments” in the variety of roles available make sure that NextGen know about all the aspects of the “business”, including the family charities, the investment side and similar. They can raise awareness of the diverse opportunities to participate which may not fit their existing preconceptions. They may demystify the business, increase awareness of its ins and outs and, importantly, build a network of contacts.
Perhaps most crucially, the charter can also set out how and when a next generation member will be assigned a personal mentor to aid their growth and development. If so, the charter should clarify the conditions for being a mentor and the prerequisites for the role in terms of experience or seniority. A family mentor can help to develop the values and connections that are key to a successful business family member. A non-family mentor can ensure that perspectives and ideas are nurtured outside the family bubble. Ultimately the decision should suit the ethos and goals set out elsewhere in the charter.
Regular next generation meetings can keep younger family members informed about how the business operates and what it will be doing in the future, as well as providing an opportunity to raise any concerns or offer ideas and a fresh perspective. How frequent and formal should this meeting be? Where should it take place and who should attend and chair it? The detail needs careful and collaborative thought. You may also wish to appoint a next generation representative to gather the thoughts and ideas and present them to the board or family council in a cohesive and useable manner. Should this representative be appointed by the next generation members themselves by a vote or by consensus, or should they be appointed by the board or council, or even solely by the chairman? In some business families, the NextGen representative is themselves a member of the board or council.
Ultimately the family charter is a document that presupposes and aims to design a secure and successful base for the family’s collective wealth into the distant future. Whilst the future is unknown, developing a cohesive, resilient and capable next generation of the family must be a key component, whatever may occur.